German financial supervision has been the focus of political and public attention since the Wirecard AG balance sheet manipulation scandal. The effects are also being felt by other companies on the market.
According to the Federal Ministry of Finance, BaFin has already been undergoing a fundamental modernization since 2020. In direct response to the scandal, the German government adopted an action plan to combat accounting fraud and strengthen control over capital and financial markets. Part of the thinking behind the action plan was the recognition that legislative reform alone would not be enough, but that reform would also have to look at the operational performance of the administration.
We are already hearing from the market that more audits are being conducted at companies in the finance and securities industry.
In accordance with section 44 of the KWG, the Federal Financial Supervisory Authority may conduct examinations at institutions, superordinate companies and outsourcing companies even without special cause, and may transfer the performance of the examinations to the Deutsche Bundesbank. A corresponding provision is found in § 88 WpHG.
This means that not only audits based on specific audit intervals or at the request of the institution take place, but also audits without direct cause can be increasingly initiated by the supervisory authority.
Our team of experts in banking and capital markets law supports companies in the financial and securities industry in implementing and reviewing processes relevant to supervisory law, including risk provisioning under financial supervisory law.